Toys R Us Failure is from Customer Experience—Not Amazon

In his article The shockingly sad but true story of Toys R Us' decline, Roger Hamilton explains that Toys R Us recently filed for bankruptcy after a losing battle with Amazon to be the ecommerce giant’s exclusive toy provider. While many may attribute this bankruptcy to the continued decline of brick and mortar retail, this failure is not a matter of digital versus physical or online versus offline.

It’s a matter of failing to understand the customer and failing to meet customer demands.

Consumers are demanding great retail experiences and won’t settle for mediocre. What worked for Toys R Us in the late 1990’s and early 2000’s wasn’t working today, but the store refused to change the way it had always operated.

Contrast this to stores like Nordstorm, which is testing the Nordstrom Local concept of providing curated services but carrying no inventory. The New York Times article, An Alternate Universe of Shopping, in Ohio, notes that numerous other forward-thinking brick and mortar brands are testing out their out-of-the-box ideas in Columbus, considered the nation’s consumer laboratory:

McDonald’s is considering testing out wait staff and table service in their restaurants.

Abercrombie & Fitch debuted its first new store design in 15 years, replacing traditional shadowy décor with warmer, better-lit displays.

DSW is testing new offerings including shoe rental, shoe storage and cobbler services—even a nail salon.

What all of these experiments have in common is a desire to innovate to meet evolving consumer needs. Perhaps there is a large segment of McDonald’s customers that would prefer to order at the table rather than stand in line for counter service. Maybe there are enough die-hard shoe collectors who shop DSW to warrant shoe storage services when a buyer comes in to stock up for the next season.

Or maybe not. But we will never know without understanding the customer—what she is trying to achieve, how she prefers to shop for any given product or service, where she sits in the buyer’s journey.

How could Toys R Us have reacted differently?

Toys R Us needed to better understand the role of their brick and mortar stores in their buyer’s journey and how stores could help customers solve their problems (or complete their jobs).

Enhance the experience.

There is likely a large segment of Toys R Us customers that would enjoy an experience center like Nordstrom Local where customers could come play with and test out the toys. Rather than focus on inventory, these stores could let buyers (and kids!) experience the items that would typically be stocked in shrink-wrapped boxes on shelves.

Special store events could include nerf gun battles and dress up contests. Store representatives could excel at providing toy recommendations for particular age groups and interests (ever wondered, “What the heck do a get for my 8-year-old niece for Christmas?”). These store locations could also accept easy, no-questions-asked returns (without a trip to UPS or the post office), which has proven to improve sales without increasing return rates.

Enhance the ease and efficiency.

There is also likely to be a large segment of Toys R Us customers that simply want ease and convenience—fast purchases with as few touchpoints as possible. In this case, Toys R Us could have provided services like online ordering with same-day delivery out of local store inventory. Based on loyalty program purchases, the store could recommend next-best toy for the child’s age and likely interests (“Hey, it’s Johnny’s birthday again. We bet he’d like a transformer. Would you like one delivered to your home?”).

If Toys R Us had paid attention to what their customers were trying to achieve, they could have understood how to use stores most effectively. We would have likely seen their stores evolve to be a mix of experience center a-la Nordstrom and ultra-convenient a-la Amazon.

Give customers what they want.

Again, Toys R Us’ bankruptcy is not about online and offline competition. It all comes down to understanding the brand’s best customer segments and innovating the retail experience to meet those segments’ needs throughout the buyer’s journey.

Most simply, focus on the customers, and give them what they want.

About the Author

Karen, Harte Hanks CEO, has an experienced track record for winning, and she knows our business inside and out. Not only has Karen been a director of Harte Hanks since 2009, she also brings nearly 15 years of COO and president experience in the telecom, cloud and managed services industries in both consumer and business segments, stemming from her time at CenturyLink, Inc. During her tenure, she was instrumental in leading the company’s transformation from a local telephone business to an industry leader in advanced communications services, and driving revenue growth from $1.5 billion to more than $18 billion. Karen has a proven track record of successfully growing a company both organically and through acquisitions (she’s overseen 15 of them) and in navigating a business through shifts in industry dynamics.